How one state is leading the charge to dismantle Obamacare

FRANKFORT, Ky./SAN FRANCISCO (Reuters) - For nearly three years, Democrats and former President Barack Obama pointed to Kentucky as one of the Affordable Care Act's biggest success stories.

A poor, rural state that straddles the North and South, Kentucky was an early adopter of the health care law commonly known as Obamacare and saw one of the country's largest drops in the uninsured rate.

Now Kentucky is poised for a new distinction: to be the first state to save money by reducing the number of people on Medicaid, the government health insurance program for the poor and disabled and a central tenant of Obamacare.

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WASHINGTON, DC - MAY 04: Republican House members join U.S. President Donald Trump on stage as he speaks during a Rose Garden event May 4, 2017 at the White House in Washington, DC. The House has passed the American Health Care Act that will replace the Obama eraï¿½ Affordable Healthcare Act with a vote of 217-213. (Photo by Alex Wong/Getty Images)

WASHINGTON, DC - MAY 04: U.S. Sen. Bernie Sanders (I-VT) speaks during a Stop 'Trumpcare' rally May 4, 2017 in front of the Capitol in Washington, DC. Congressional Democrats joined activists for a rally to urge not to replace Obamacare, also known as the Affordable Care Act. (Photo by Alex Wong/Getty Images)

WASHINGTON, DC - MAY 04: U.S. Senate Minority Leader Sen. Charles Schumer (D-NY) (R) greets House Minority Leader Rep. Nancy Pelosi (D-CA) (L) during a Stop 'Trumpcare' rally May 4, 2017 in front of the Capitol in Washington, DC. Congressional Democrats joined activists for a rally to urge not to replace Obamacare, also known as the Affordable Care Act. (Photo by Alex Wong/Getty Images)

WASHINGTON, DC - MAY 04: U.S. President Donald Trump shares a moment with Speaker of the House Rep. Paul Ryan (R-WI) during a Rose Garden event May 4, 2017 at the White House in Washington, DC. The House has passed the American Health Care Act that will replace the Obama eraï¿½ Affordable Healthcare Act with a vote of 217-213. (Photo by Alex Wong/Getty Images)

WASHINGTON, DC - MAY 04: U.S. House Minority Leader Rep. Nancy Pelosi (D-CA) (L) gestures as Sen. Patty Murray (D-WA) and Sen. Bernie Sanders (I-VT) wait for their turns to speak during a Stop 'Trumpcare' rally May 4, 2017 in front of the Capitol in Washington, DC. Congressional Democrats joined activists for a rally to urge not to replace Obamacare, also known as the Affordable Care Act. (Photo by Alex Wong/Getty Images)

UNITED STATES - MAY 4: Charlie Wood, 4, of Charlottesville, Va., plays with bubbles during rally on the East Front lawn of the Capitol to oppose the House Republicans' bill to repeal and replace the Affordable Care Act on May 4, 2017. She was born 3 1/2 months earlier and her mother Rebecca, at left, holding a picture of Charlie in the hospital, fears changes to the ACA will negatively effect her care. (Photo By Tom Williams/CQ Roll Call)

Health and Human Services Secretary Tom Price speaks in the Rose Garden of the White House following the House of Representative vote on the health care bill on May 4, 2017 in Washington, DC.
Following weeks of in-party feuding and mounting pressure from the White House, lawmakers voted 217 to 213 to pass a bill dismantling much of Barack Obama's Affordable Care Act and allowing US states to opt out of many of the law's key health benefit guarantees / AFP PHOTO / Mandel NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)

Ivanka Trump and Jared Kushner listen to US President Donald Trump speak in the Rose Garden of the White House following the House of Representative vote on the health care bill on May 4, 2017 in Washington, D
Following weeks of in-party feuding and mounting pressure from the White House, lawmakers voted 217 to 213 to pass a bill dismantling much of Barack Obama's Affordable Care Act and allowing US states to opt out of many of the law's key health benefit guarantees / AFP PHOTO / Mandel NGAN (Photo credit should read MANDEL NGAN/AFP/Getty Images)

UNITED STATES - MARCH 9: Speaker of the House Paul Ryan, R-Wis., conducts a presentation in the House studio of the American Health Care Act, the GOP's plan to repeal and replace the Affordable Care Act, March 9, 2017. (Photo By Tom Williams/CQ Roll Call)

WASHINGTON, DC - MARCH 07: U.S. Secretary of Health and Human Services Tom Price compares a copy of the Affordable Care Act (R) and a copy of the new House Republican health care bill (L) during the White House daily press briefing March 7, 2017 at the White House in Washington, DC. Secretary Price answered questions on the new healthcare bill during the briefing. (Photo by Alex Wong/Getty Images)

U.S. Speaker of the House Paul Ryan speaks to the media about the American Health Care Act at the Capitol in Washington, D.C., U.S. March 15, 2017. REUTERS/Aaron P. Bernstein

WASHINGTON, DC - MARCH 13: U.S. Health and Human Services Secretary Tom Price (L) and Office of Management and Budget Director Mick Mulvaney talk to reporters following the release of the Congressional Budget Office report on the proposed American Health Care Act outside the White House West Wing March 13, 2017 in Washington, DC. Price said 'We disagree strenuously' with the findings of the CBO report about the Republican's attempt to repeal and replace the Affordable Care Act, or Obamacare. (Photo by Chip Somodevilla/Getty Images)

Speaker of the House Paul Ryan speaks at a news conference about Congressional efforts to repeal and replace Obamacare, on Capitol Hill in Washington, U.S. March 9, 2017. REUTERS/Aaron P. Bernstein

WASHINGTON, DC - MARCH 10: U.S. Vice President Mike Pence (4th L) delivers remarks at the beginning of a meeting with representatives of conservative political organizations to discuss the American Health Care Act in the Indian Treaty Room in the Eisenhower Executive Office Building March 10, 2017 in Washington, DC. Pence and Health and Human Services Secretary Tom Price led the meeting that included representatives from the Cato Institute, Tea Party Patriots, the American Conservative Union, Freedom Works, the American Legislative Exchange Council and other conservative groups. (Photo by Chip Somodevilla/Getty Images)

U.S. Speaker of the House Paul Ryan speaks to the media about the American Health Care Act at the Capitol in Washington, D.C., U.S. March 15, 2017. REUTERS/Aaron P. Bernstein

WASHINGTON, DC - MARCH 10: (L-R) U.S. Vice President Mike Pence and President Donald Trump greet House of Representatives committee leaders (L-R) House Budget Committee Chairwoman Diane Black (R-TN), Energy and Commerce Committee Chairman Greg Walden (R-WA) and Education and Workforce Committee Chairwoman Virginia Foxx (R-NC) before a meeting to discuss the American Health Care Act in the Roosevelt Room at the White House March 10, 2017 in Washington, DC. The proposed legislation is the Republican attempt to repeal and replace Obamacare. (Photo by Chip Somodevilla/Getty Images)

U.S. Speaker of the House Paul Ryan speaks to the media about the American Health Care Act at the Capitol in Washington, D.C., U.S. March 15, 2017. REUTERS/Aaron P. Bernstein

U.S. Health and Human Services Secretary Tom Price speaks about efforts to repeal and replace Obamacare and the advancement of the American Health Care Act on Capitol Hill in Washington, U.S., March 17, 2017. REUTERS/Joshua Roberts

A copy of Obamacare repeal and replace recommendations (L) produced by Republicans in the U.S. House of Representatives sit next to a copy of the Affordable Care Act known as Obamacare as U.S. Health and Human Services Secretary Tom Price addresses the daily press briefing at the White House in Washington, U.S. March 7, 2017. REUTERS/Carlos Barria

(L-R) U.S. House Speaker Paul Ryan, U.S. House Majority Leader Kevin McCarthy, and U.S. Representative Greg Walden hold a news conference on the American Health Care Act on Capitol Hill in Washington, U.S. March 7, 2017. REUTERS/Eric Thayer

UNITED STATES - MARCH 14: House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Charles Schumer, D-N.Y., attend a news conference in the Capitol Visitor Center to voice opposition to House Republican's health care plan, the American Health Care Act, March 14, 2017. The event featured testimony from patients and doctors who benefit from the Affordable Care Act. (Photo By Tom Williams/CQ Roll Call)

UNITED STATES - MARCH 14: From left, Dr. Alice T. Chen, Senate Minority Leader Charles Schumer, D-N.Y., Sen. Maggie Hassn, D-N.H., and House Minority Leader Nancy Pelosi, D-Calif., attend a news conference in the Capitol Visitor Center to voice opposition to House Republican's health care plan, the American Health Care Act, March 14, 2017. The event featured testimony from patients and doctors who benefit from the Affordable Care Act. (Photo By Tom Williams/CQ Roll Call)

Speaker of the House Paul Ryan speaks at a news conference about Congressional efforts to repeal and replace Obamacare, on Capitol Hill in Washington, U.S. March 9, 2017. REUTERS/Aaron P. Bernstein

WASHINGTON, DC - MARCH 08: House Energy and Commerce Committee staff members work during a markup hearing on the proposed American Health Care Act, the Republican attempt to repeal and replace Obamacare, in the Rayburn House Office Building on Capitol Hill March 8, 2017 in Washington, DC. House Republicans were rushing the legislation through the powerful Energy and Commerce, and Ways and Means committees, aiming for a full House vote next week. (Photo by Chip Somodevilla/Getty Images)

WASHINGTON, DC - MARCH 07: House Energy and Commerce Chairman Greg Walden (R-OR) (R) and House Ways and Means Chairman Kevin Brady (R-TX) (L) arrive for a news conference on the newly announced American Health Care Act at the U.S. Capitol March 7, 2017 in Washington, DC. House Republicans yesterday released details on their plan to replace the Affordable Care Act, or Obamacare, with a more conservative agenda that includes individual tax credits and grants for states replacing federal insurance subsidies. (Photo by Win McNamee/Getty Images)

White House Press Secretary Sean Spicer (L) looks on as US Secretary of Health and Human Service Tom Price (R) points to a print-out of the Affordable Care Act (ACA) and a copy of the new plan introduced to repeal and replace the ACA during the daily briefing at the White House in Washington, DC on March 7, 2017. / AFP PHOTO / JIM WATSON (Photo credit should read JIM WATSON/AFP/Getty Images)

WASHINGTON, DC - MARCH 07: House Ways and Means Chairman Kevin Brady (R-TX) (L) and House Energy and Commerce Chairman Greg Walden (R-OR) (R) answer questions during a news conference on the newly announced American Health Care Act at the U.S. Capitol March 7, 2017 in Washington, DC. House Republicans yesterday released details on their plan to replace the Affordable Care Act, or Obamacare, with a more conservative agenda that includes individual tax credits and grants for states replacing federal insurance subsidies. (Photo by Win McNamee/Getty Images)

UNITED STATES - MAY 4: Protesters yell 'shame'' to members of Congress on the East Front of the Capitol after the House passed the Republicans' bill to repeal and replace the Affordable Care Act on May 4, 2017. The protesters support the ACA. (Photo By Tom Williams/CQ Roll Call)

WASHINGTON, DC - MAY 04: U.S. Sen. Bernie Sanders (I-VT) speaks during a Stop 'Trumpcare' rally May 4, 2017 in front of the Capitol in Washington, DC. Congressional Democrats joined activists for a rally to urge not to replace Obamacare, also known as the Affordable Care Act. (Photo by Alex Wong/Getty Images)

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If successful, Kentucky would provide a roadmap for other states who are worried about paying an increasing share for people on Medicaid.

A new Republican health law that passed the U.S. House of Representatives on Thursday, along with state initiatives like Kentucky's, would dramatically change the national health care system and cut more than $800 billion from Medicaid over the next 10 years.

The Republican bill still faces a long road ahead in the U.S. Senate and its final passage is far from assured, making initiatives like Kentucky's all the more important.

Kentucky has proposed to lessen its financial burden before it grows by reducing the number of residents on Medicaid by nearly 86,000 within five years, saving more than $330 million in the process. For a graphic click http://tmsnrt.rs/2on0HVK

Kentucky's plan also calls for new work requirements for able-bodied adults to get insurance. Plus, it would establish new fees for all members based on income and lock out some people who miss a payment or fail to re-enroll.

By following these proposed rules, Kentucky believes Medicaid enrollees will over time graduate from Medicaid to private and employer insurance plans.

"One of the most remarkable lies that has perpetrated in recent years in the health care community in America is that expanded Medicaid was working well in Kentucky," Republican Governor Matt Bevin, who is leading the state effort, told Reuters from the governor's mansion in Frankfort, Kentucky.

That view is in line with President Donald Trump's administration, which has criticized Obamacare's Medicaid expansion and urged states to pursue similar Medicaid reforms to what Kentucky is now attempting.

"If Kentucky is successful, you'll see this spread through the more conservative-leaning states. It's possible even a Democratic blue state could do it," said George Huang, director and senior municipal health care research analyst at Wells Fargo Securities. "It's the flexibility that some states are seeking."

INSURING THE POOR AT A PRICE

Kentucky, a state Trump won handily last November, has been devastated by the loss of coal mining jobs and an opioid epidemic. The state sits near the bottom of health rankings for smoking rates, cancer deaths and diabetes.

"To me, morally, it was the right thing to expand Medicaid, but I had a responsibility to not to do something that would bankrupt the state," said former Governor Steve Beshear, a Democrat, referring to the increased costs of caring for a larger population with Medicaid insurance.

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Tea Party Patriots supporters hold signs protesting the Affordable Care Act in front of the Supreme Court as the court hears arguments on the health care reform bill on Tuesday, March 27, 2012.

A man holds signs during a protest on the second day of oral arguments for the Patient Protection and Affordable Care Act in front of the U.S. Supreme Court building on March 27, 2012 in Washington, DC. Today is the second of three days the high court has set aside to hear six hours of arguments over the constitutionality President Barack Obama's Patient Protection and Affordable Care Act.

(Photo by Mark Wilson/Getty Images)

Sister Caroline attends a rally with other supporters of religious freedom to praise the Supreme Court's decision in the Hobby Lobby, contraception coverage requirement case on June 30, 2014 in Chicago, Illinois. Oklahoma-based Hobby Lobby, which operates a chain of arts-and-craft stores, challenged the provision and the high court ruled 5-4 that requiring family-owned corporations to pay for insurance coverage for contraception under the Affordable Care Act violated a federal law protecting religious freedom.

(Photo by Scott Olson/Getty Images)

An Obamacare supporter counter protests a Tea Party rally in front of the U.S. Supreme Court in the morning hours of March 27, 2012 in Washington, DC. The Supreme Court continued to hear oral arguments on the Patient Protection and Affordable Care Act.

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Affordable Care Act supporters hold up signs outside the Supreme Court as they wait for the court's decision on Obamacare on Thursday, June 25, 2015.

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Ron Kirby holds a sign while marching in protest of the Patient Protection and Affordable Care Act in front of the U.S. Supreme Court on March 26, 2012 in Washington, DC. Today the high court, which has set aside six hours over three days, will hear arguments over the constitutionality President Barack Obama's Patient Protection and Affordable Care Act.

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A protester waves his bible in the air as he overpowered by cheers from supporters of the Affordable Care Act as they celebrate the opinion for health care outside of the Supreme Court in Washington,Thursday June 25, 2015. The Supreme Court on Thursday upheld the nationwide tax subsidies under President Barack Obama's health care overhaul, in a ruling that preserves health insurance for millions of Americans.

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Nuns, who are opposed to the Affordable Care Act's contraception mandate, and other supporters rally outside of the Supreme Court in Washington, D.C., U.S., on Wednesday, March 23, 2016. On Wednesday morning, the Supreme Court is scheduled to hear oral arguments in Zubik v. Burwell, a consolidated case brought by religious groups challenging a process for opting out of the Affordable Care Act's contraception mandate.

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Supporters of contraception rally before Zubik v. Burwell, an appeal brought by Christian groups demanding full exemption from the requirement to provide insurance covering contraception under the Affordable Care Act, is heard by the U.S. Supreme Court in Washington March 23, 2016.

(REUTERS/Joshua Roberts)

Protestors hold placards challenging 'Obamacare' outside of the US Supreme Court on March 4, 2015 in Washington, DC. The US Supreme Court heard a second challenge to US President Barack Obama's Affordable Care Act. The US Supreme Court faces a momentous case Wednesday on the sweeping health insurance reform law that President Barack Obama wants to leave as part of his legacy. The question before the court is whether the seven million people or more who subscribed via the government's website can obtain tax subsidies that make the coverage affordable. A ruling is expected in June.

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Linda Door (L) protests against President Obama's health care plan in front of the U.S. Supreme Court Building on March 26, 2012 in Washington, DC. Today the high court, which has set aside six hours over three days, will hear arguments over the constitutionality President Barack Obama's Patient Protection and Affordable Care Act.

(Photo by Mark Wilson/Getty Images)

Supporters of the Affordable Care Act celebrate after the Supreme Court up held the law in the 6-3 vote at the Supreme Court in Washington June 25, 2015. The U.S. Supreme Court on Thursday upheld the nationwide availability of tax subsidies that are crucial to the implementation of President Barack Obama's signature healthcare law, handing a major victory to the president.

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More than 30 states, about a dozen of which are led by Republican governors, expanded Medicaid under Obamacare. In Kentucky, more than 400,000 people gained health insurance through the program, the highest growth rate of Medicaid coverage of any state.

Beshear commissioned independent studies by PricewaterhouseCoopers and Deloitte on the financial and health impacts of expanding Medicaid. Both studies found health and economic gains. Deloitte reported that 90,000 newly covered residents received cholesterol screening and 80,000 got preventative dental care within a year. It estimated Kentucky would see an economic boost of $30 billion and 40,000 new jobs by 2021.

Beshear's successor, Republican Governor Bevin, was elected in 2015 on a promise to repeal and replace the health care law on the view that thousands of Kentuckians had unaffordable premiums and only one health insurer to choose from.

He dismissed the projections in the Beshear-commissioned studies as "preposterous," and says the state's share of expanded Medicaid - $74 million in 2017 and totaling $1.2 billion over five years - was too expensive and unsustainable.

"We want this to be a helping hand for people at a time when they need it, but then be able to return to the commercial marketplace," Bevin said.

Last year, Bevin submitted the waiver to restrict Medicaid eligibility by requiring enrollees to work or volunteer at least 20 hours per week and to pay monthly premiums based on income. He's still awaiting approval.

Bevin said he has spoken with several governors about the waiver and has had extensive conversations with Health and Human Services Secretary Tom Price about fast-tracking the approval process in order for other states to quickly adopt similar programs. Such conversations are occurring across the country in response to encouragement from the new administration to reform state Medicaid programs, said Alleigh Marre, a Health and Human Services spokeswoman.

Louisiana and Wisconsin are considering work requirements for Medicaid enrollees. The Obama administration rejected previous attempts by other states, including Ohio and Arizona, to require work programs and monthly premiums for Medicaid, historically a free program for those eligible.

"Every state is watching this to see what happens," said Bevin of Kentucky's waiver. "It's the first one in the queue."

SIGNS POINT TO "YES" FOR KENTUCKY WAIVER

The odds look good for Kentucky to get the waiver in the coming months, based on the track records of health officials that Trump named after his inauguration.

Seema Verma, the new head of the Centers for Medicare and Medicaid Services, which approves Medicaid waivers, said during congressional testimony that the agency will usher in "a new era of state flexibility and leadership."

Verma helped craft Kentucky's waiver, but said she will recuse herself from the approval process to avoid conflicts of interest.

She and Tom Price wrote a letter to governors in March encouraging Medicaid reforms that more closely resemble commercial insurance plans. In the letter, they suggested features such as premium fees, health savings accounts, and emergency room co-payments that encourage the use of primary care.

CMS declined to comment on Kentucky's waiver and said it does not speculate on the process while ongoing.

"Waivers have never been used to cut people from the rolls," said Emily Parento, associate professor at the University of the Pacific's law school and the former executive director of Kentucky's Office of Health Policy.

But Verma's office is encouraging changes to Medicaid that make the government program look more like private insurance policies - goals that are similar to Bevin's in Kentucky.

"I think what will happen is that other states will look at it and go, 'We want everything they got,'" Bevin said.

(Reporting by Yasmeen Abutaleb in Kentucky and Robin Respaut in San Francisco; Editing by Caroline Humer and Edward Tobin)